The Quick Read: An FHA cash-out can lend up to 80% of your home’s adjusted value, and that cap covers the whole new loan. The loan has to pay off your current mortgage, the buyout, and closing costs first. Whatever fits under 80% after those items is the most you could take as cash. If the buyout and your mortgage already crowd that ceiling, the deal may not work at all.
How Does the 80% Cap Actually Work?
The cap limits the new loan, not the cash you receive. HUD’s Mortgagee Letter 2019-11 set the maximum loan-to-value (LTV, the loan as a share of the home’s value) and the combined LTV at 80% for FHA cash-out refinances. It is measured on the “Adjusted Value,” not simply the raw appraisal. The limit had earlier been cut from 95% to 85%, per a HUD press release on cash-out risk, before it moved to 80%. Any guide that still says 85% is out of date. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
FHA cash-out estimate
Seeded with an example value, a balance to match, and a round cash request; change any field.
Editable benchmark: 7.18% as of November 5, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not an FHA cash-out refinance quote.
Illustrative starting assumptions: a $350,000 home value, a $193,000 current balance, the FHA cap on a principal residence with the upfront premium financed, a thirty-year term at the current Freddie Mac benchmark, and property taxes and insurance estimated at typical national rates. Every field is editable.
An illustration, not a Loan Estimate, an approval, a quote, or a commitment to lend. The rate shown is the weekly Freddie Mac thirty-year conventional benchmark, used as a market reference; an FHA cash-out is priced by the lender at lock, and this is not an FHA cash-out refinance quote. HUD’s cap limits the base loan; the upfront premium is financed on top of the capped base loan; the monthly premium for the first year follows the snapshot’s schedule. Cash available means the base loan the cap permits less the balances retired, before closing costs, which this calculator leaves out. The line figure applies the line program’s combined loan-to-value ceiling to the same value and balance. Taxes and insurance are estimates you can edit. Licensed in sixteen states for consumer mortgages.
Think of the cap as a bucket. The bucket holds three things in this order:
1. The payoff of your existing mortgage and other liens.
2. The buyout owed to the person leaving title.
3. Closing costs and any prepaid items.
Whatever room is left is your cash. The 80% also means at least 20% of the home’s value stays as equity. That is HUD’s design, and a buyout comes out of that same room.
A second ceiling sits above the first. County loan limits apply, and they change every year. For most homes the 80% cap bites first, but the county limit is part of the sizing.
What Counts as a Cash-Out Here?
Three FHA refinance types come up in buyout conversations. Only one is built to pay someone out.
Cash-out refinance. A new loan that pays off the old one and can put cash in the borrower’s hands. Across the wholesale programs Lendmire places files with, FHA cash-out reaches 80% LTV on a home you have owned and lived in for 12 months before the case number is assigned. Subject to lender guidelines and full file review, this is the type that can fund a buyout.
Rate-and-term refinance. A refinance that changes the rate or term without taking equity out. With an appraisal, it reaches 97.75% on a principal residence you have occupied for the previous twelve months. Higher leverage, but a buyout is not what it is built for.
Streamline refinance. This refinances an existing FHA loan with no appraisal, a limited credit review, and a net tangible benefit (the borrower must come out ahead in a measurable way). It is not a buyout tool. HUD’s streamline rules do allow a borrower to come off the loan in cases of divorce, legal separation or death. Even then, the remaining borrower must have been awarded the property and must have made the payments on their own for a set period beforehand. An unmarried partner, sibling or parent who simply wants out does not fit that exception. Streamlines also allow very little cash back, so they cannot fund a payout.
How Is the Buyout Figure Calculated?
It starts with an agreement, not a formula. The departing owner is owed a specific amount, and that amount is whatever the written agreement says. The lender’s job is to see that it is documented and that the new loan fits.
Here is the step-by-step logic, using percentages instead of dollars:
| Step | What happens |
|---|---|
| 1. Appraisal | Sets the Adjusted Value |
| 2. Cap | 80% of that value is the largest total loan |
| 3. Subtract | Existing liens, then the buyout, then closing costs |
| 4. Remainder | The most you could take as cash, if any |
Picture how it plays out. A home appraises, and 80% of its Adjusted Value sets the largest total loan. Your current mortgage uses most of that room. The buyout takes the next slice. If those two already reach the cap, nothing is left over, and the buyout may not fit at all. If the buyout is bigger than the room, the options are a smaller payout, a partly separate arrangement, or a different plan such as selling.
Who the agreement is with matters less than you might think. Handbook language quoted in secondary sources treats the equity owed to an existing title-holder as property-related debt that can be counted in the new loan, and asks for a divorce decree, settlement agreement or other legally enforceable equity agreement. Those sources are older, so treat the exact wording as something to confirm. Current rules live in HUD Handbook 4000.1. The phrase “other legally enforceable equity agreement” is broad enough that a signed agreement can matter for a partner, sibling or parent on title. Whether a given non-divorce case is accepted is something underwriting decides.
Does This Work for Unmarried Partners, Siblings and Parents?
Often it can, because the loan cares about title and the documented equity owed, not the relationship. A divorce is the common trigger, but it is not the only one. HUD’s glossary defines a family member to include a child, parent or grandparent, a spouse or domestic partner, and a brother or stepbrother, among others. Its glossary also defines an arm’s-length transaction as one between unrelated parties acting in their own best interest.
Do not confuse a buyout with a family sale. Identity-of-interest rules apply when a relative sells you the home. A refinance buyout is different: you already hold title, and the new loan pays out the other owner. A gift of equity in a purchase follows its own rules.
| Who is leaving | Typical paperwork | Main question |
|---|---|---|
| Ex-spouse | Decree or settlement agreement | Does the decree award you the home and the payoff? |
| Unmarried partner | Signed equity agreement, deed | Is the amount owed clearly written? |
| Sibling | Signed equity agreement, deed | Same, plus any estate paperwork |
| Parent | Signed equity agreement, deed | Same, and are you the one living there? |
Each case is subject to lender guidelines and underwriting review.
What Do You Need to Qualify?
You carry the loan alone, so you must qualify alone. Income from a person who does not live in the home generally cannot be used on a cash-out. That differs from FHA purchase loans, where a non-occupant co-borrower is allowed. So the “add a relative to help” move that works on a purchase usually does not rescue a cash-out.
A short eligibility checklist:
- The home is your principal residence. Investment properties and second homes do not qualify for standard FHA cash-out.
- You have owned and lived in it for about a year before the case number is assigned.
- Your income, credit and debts support the new loan by themselves.
- A written agreement documents what the leaving owner is owed.
- The total loan fits under 80% of Adjusted Value and under the county limit.
On credit, the wholesale programs Lendmire places FHA loans with start at a decision score of 580. The base ratio pair is 31/43 (housing costs and total debts as a share of income) with no compensating factors. Documented compensating factors, such as reserves, can stretch that toward 40/50 at the top tier, and the automated underwriting finding governs most files. Everything stays subject to lender guidelines.
Documents to gather:
- The title or deed.
- A current mortgage statement.
- The signed agreement or decree.
- Income, asset and credit documents for the remaining owner.
- A full appraisal.
What Happens to the Monthly Budget?
You trade one loan for a larger one in your name alone. FHA mortgage insurance comes with it. That means an upfront premium that is typically financed into the balance, plus an annual premium that varies with term, loan amount and LTV. On a thirty-year loan with a higher LTV, the annual premium lasts for the term. At a lower LTV, it ends after eleven years. A cash-out at the 80% cap sits on the lower-LTV side of that line, which is worth knowing.
A new loan can also carry a different interest rate and term than the one it replaces, so your payment can move up or down. You will see exact figures on your Loan Estimate and Closing Disclosure, which is where to compare the full picture. Expect full underwriting and an appraisal, plus title work and closing costs.
Why Not Just Come Off the Mortgage?
Because a divorce decree or a signed agreement does not release anyone from the loan. A court order divides property between people. The lender is not a party to it. The CFPB has reported that some servicers refuse to release the original borrower from liability after a divorce or death, and some homeowners report this even after paying for years.
A refinance in one name is the clean fix. The old loan is paid off, the buyout is paid at closing, the departing owner comes off title, and the new loan sits in the remaining owner’s name only. That is why leaving owners often insist on it.
Where the General Rule Breaks
A few edge cases change the answer:
- Free-and-clear homes. A home with no mortgage can still be refinanced as cash-out, per an archived HUD refinance guide. That guide predates the 80% cap, so use it for this point only.
- Inherited homes. The same guide says a home acquired by inheritance in the past 12 months can qualify if you have lived in it as your primary residence since.
- Recent gifts and inheritance. HUD’s handbook glossary notes that property acquired within 12 months by inheritance, family gift or a non-monetary transaction may use a special Adjusted Value calculation.
- Hawaiian Home Lands. Section 247 loans were excluded from the 80% change, per Consumer Finance Monitor.
- Splitting the payout. Paying part of the buyout over time under a separate private agreement is a negotiation between you and the other owner. Whether a lender accepts it depends on how it is documented.
One more honest point. Structuring a family deal to hand someone cash while avoiding cash-out treatment is not something to attempt. Let the file be classified the way the facts say.
FHA Cash-Out, Another Loan, or Selling?
| Factor | FHA cash-out | Other refinance types | Selling |
|---|---|---|---|
| Pays out a co-owner | Yes, within the 80% cap | Depends on the program | Yes, from proceeds |
| Keeps the home | Yes | Yes | No |
| Credit flexibility | Starts at a 580 decision score on the network’s programs | Some lenders set higher floors | Not needed |
| Removes the other person from the loan | Yes | Yes | Yes |
| Main drawback | Mortgage insurance, full underwriting | Rules differ by program | You lose the home |
Conventional and VA programs treat co-owner buyouts differently. Rather than compare numbers across programs, ask for each option side by side on a Loan Estimate.
Key Terms Defined
Adjusted Value: HUD’s version of the home’s value used to set the cap, based on the appraisal and any special adjustments.
Cash-out refinance: A new, larger loan that pays off the old one and can put cash in your hands.
Equity buyout: A payment to a co-owner for their share of the home’s value.
LTV: The loan amount divided by the home’s value, shown as a percentage.
Streamline refinance: A simplified FHA-to-FHA refinance with no appraisal and very little cash back.
What Goes Wrong Most Often
Several mistakes show up repeatedly:
- Assuming the cap is 85%, or that it applies to your equity rather than the whole loan.
- Treating the buyout as extra cash on top of the 80%, when it sits inside it.
- Counting on a non-occupant relative’s income.
- Trying a streamline to pay out someone who is not leaving through divorce or death.
- Skipping a written equity agreement, so the buyout amount is not documented.
- Forgetting that mortgage insurance and closing costs come out of the same room.
Frequently Asked Questions
Can an FHA cash-out pay off my ex or a relative on title?
Yes, within the limits. The buyout counts toward the new loan, which cannot exceed 80% of Adjusted Value. You also need to qualify alone and meet the ownership and occupancy tests. Approval is subject to lender guidelines and full file review.
Does the buyout take me off the old mortgage?
Only a refinance does that. The new loan pays off the old one, so the departing owner is released from it. A divorce decree alone does not release anyone from the loan.
Can I add a co-borrower who doesn’t live here to help me qualify?
Generally not on a cash-out. Income from a non-occupant co-borrower cannot be used for this type of refinance, so the person staying has to carry the loan with their own income, credit and debts.
Do I need to have owned the home for a certain time?
Yes. The wholesale programs Lendmire places files with require that the home be owned and occupied for 12 months before the case number is assigned for FHA cash-out. Inheritance is an exception worth asking about.
What if the buyout is larger than the room under 80%?
Then the loan cannot cover it in full. The options are a smaller payout, a separate arrangement with the other owner, or selling. Lendmire can lay out the numbers before you commit.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. HUD Mortgagee Letter 2019-11
2. HUD press release on FHA cash-out risk
4. CFPB: homeowners face problems after divorce or death
5. HUD Archives refinance reference guide (pre-2019)
6. HUD Handbook 4000.1 glossary
This article is part of Lendmire’s FHA cash-out refinance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How an FHA Cash-Out Lender Counts S-Corp Distributions · Can a Spouse Be Left Off an FHA Cash-Out in a Community-Property State? · How to Apply for an FHA Cash-Out When Your DTI Runs High
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.